Chapter 11 Quiz

-NOT IN GUIDE- Under accrual accounting, all expenses reported on the income statement represent cash costs. Select one: True False

False

-NOT IN GUIDE- Under accrual accounting, all revenues reported on the income statement represent cash collections. Select one: True False

False

The set of rules and regulations that govern the content and format of financial statements is called Government Acceptable Procedures (GAP). Select one: True False

False

The requirement to provide financial accounting information is driven by the need for outside stakeholders (primarily investors) to have reliable information about the financial status of an organization. Select one: True False

True

Which of the following statements about gross and net patient service revenue is most correct? Select one: a. Gross revenue reports revenue based on chargemaster prices. b. Net revenue is gross revenue less discounts and charity care. c. Net revenue is gross revenue less discounts, charity care, and bad debt losses. d. Both a. and b. above are correct. e. Both a. and c. above are correct.

d. Both a. and b. above are correct.

Which of the following statements about income statement expenses is most correct? Select one: a. Supplies are expensed (shown) on the income statement when purchased. b. Supplies are expensed (shown) on the income statement when consumed (used to provide patient services). c. All lease expense is reported on the income statement. d. Both a. and c. above are correct. e. Both b. and c. above are correct.

e. Both b. and c. above are correct.

Which of the following statements about cash versus accrual accounting is most correct? Select one: a. In cash accounting, an event is recognized when a cash transaction occurs. b. In accrual accounting, an event is recognized when a cash transaction occurs. c. Most large healthcare organizations use cash accounting. d. Most small healthcare organizations use accrual accounting because it closely matches statements required for income tax purposes. e. In cash accounting, an event is recognized when the obligation for a cash transaction is created.

a. In cash accounting, an event is recognized when a cash transaction occurs.

Which of the following statements concerning net income versus cash flow is most correct? Select one: a. Net income is a rough measure of a business's cash flow. b. Net income can be converted into a rough measure of cash flow by adding noncash expenses, typically depreciation. c. Net income can be converted into a rough measure of cash flow by adding nonoperating income. d. Net income can be converted into a rough measure of cash flow by adding the provision for bad debts. e. None of the above statements are correct.

b. Net income can be converted into a rough measure of cash flow by adding noncash expenses, typically depreciation.

Which of the following statements concerning depreciation expense is most correct? Select one: a. Depreciation expense accounts for the loss of value of inventory. b. Depreciation expense accounts for the loss of value of securities investments. c. Depreciation expense accounts for the loss of value of fixed assets (plant and equipment). d. For accounting purposes, depreciation expense is calculated by the double declining balance method. e. For accounting purposes, depreciation expense is calculated by the triple declining balance method.

c. Depreciation expense accounts for the loss of value of fixed assets (plant and equipment).

Which of the following statements about the income statement is most correct? Select one: a. It has several alternative names, including the statement of liabilities. b. It reports the financial status of an organization as of a single point in time. c. It reports the economic profitability of an organization. d. Its three major sections are operating costs, nonoperating costs, and total (net) costs. e. Income statements are always prepared annually, but never for shorter periods (for example, quarterly).

c. It reports the economic profitability of an organization.

Which of the following items are part of a business' set of financial statements? Select one: a. Income statement b. Balance sheet c. Statement of cash flows d. Both a. and b. above e. a., b., and c. above

e. a., b., and c. above

Which of the following statements concerning net income is most correct? Select one: a. Net income is the "bottom line" of the income statement. b. Net income measures total profitability as defined by accounting rules and regulations. c. In not-for-profit businesses, the entire amount of net income is reinvested in the business. d. Both a. and b. above are correct. e. a., b., and c. above are correct.

e. a., b., and c. above are correct.